Budgeting is hard for everyone, particularly those who are living on a fixed income. It is becoming increasingly common for seniors to struggle financially after retiring, since many rely solely on social security benefits and meager savings to make ends meet. Even if an elder has been prudent and fortunate enough to amass significant savings for retirement, these funds must be managed carefully to ensure they last, especially given the rising costs of long-term care.
According to Genworth’s 2020 Cost of Care Survey, the median cost of elder care services can range from $1,603 per month for adult day health care to $8,821 per month for a private room in a nursing home. Aging parents may not anticipate ever needing to pay for elder care, but LongTermCare.gov estimates that someone turning 65 today has a nearly 70 percent chance of needing some type of long-term care services and supports in their lifetime. Carefully planning for current and future expenses now will help ensure your parents do not outlive their funds and will be able to receive the care they need.
Discussing Budgeting With Aging Parents
For adult children, talking to aging parents about money can be a challenge. At the heart of the issue is the fact that we didn’t perform the years of hard work needed to earn these funds. Who are we to suggest or dictate how their money should be saved or spent? Broaching this topic is often uncomfortable at first, but your approach can make or break the conversation. Avoid being critical or condescending and emphasize the fact that you have their best interests at heart.
The goal is to foster trust, open communication and teamwork, but even the most respectful attempts at discussing finances can result in a parent feeling like the victim of a hostile takeover. At the end of the day, if a resistant elder is still of sound mind and has not fallen victim to undue influence or financial elder abuse, then they have every right to manage their money however they want. This can be a frustrating thing to accept, but a family caregiver’s only recourse is to gently encourage smarter financial decisions and carefully monitor the situation from afar.
Tips for Budgeting for Seniors
If your aging loved one is open to using new strategies to reduce their expenses and make their money go further, try implementing some of the following tips.
Create a Monthly Expense Worksheet
The first step most financial planners recommend is filling out an expense worksheet that includes all monthly income and expenses. This will provide you with a good handle on your loved one’s expenditures and help you identify which areas, if any, need to be pared back. If there is a deficit in monthly income, the ensuing suggestions can help minimize the discrepancy.
Download a printable budget worksheet for senior citizens here.
Reduce Utility Costs
Contact your loved one’s utility companies to see if they offer a monthly budget-billing plan, which keeps their bill the same amount every month. Instead of paying higher monthly bills during certain times of year due to increased energy usage for heating or cooling, the cost is spread more evenly over 12 months. Predictable expenses make it easier to follow a set budget that does not fluctuate throughout the year.
Choose Insurance Premium Payment Plans Wisely
Insurance premiums can be paid on a variety of installment plans, such as monthly, quarterly or semi-annually. Depending on your loved one’s cash flow, paying premiums in installments might be more feasible than making one large payment for the year. However, some insurance companies offer discounts for customers who pay in full. Paying annual premiums for auto insurance, health insurance, homeowners insurance and life insurance involves large outlays up front, but this is often the least expensive option.
Look for Senior Savings Programs and Government Benefits
If your loved one owns a home, there may be savings available to them if they meet certain eligibility requirements. For example, New York state offers the School Tax Relief (STAR) program to help senior homeowners in certain income brackets reduce the amounts owed for property taxes. Visit Benefits.gov to see if your elderly loved one is eligible for any local, state or federal assistance or discount programs. Benefits like housing assistance, Supplemental Nutrition Assistance Programs (food stamps) and energy assistance can help minimize expenses for low-income seniors. You can also check with your Area Agency on Aging (AAA) for additional resources, guidance and assistance with benefits applications.
Research Senior Discounts
There are multiple ways to help older adults save money, just as there are for anyone else, but this is one time that aging individuals have the advantage. Older adults can enjoy a “senior discount” at many businesses, particularly restaurants, retailers and hotels. Anyone who is eligible and doesn’t use this discount is literally leaving money on the table. While the savings on a single transaction usually aren’t tremendous, they will accumulate over time when applied consistently. You and your loved one can search for lists of senior discounts online, but it never hurts to ask a business if they currently offer deals or would consider introducing some.
While some may consider couponing more of a hassle than an effective money saver, coupons can add another 10 to 20 percent of savings on the average purchase of things like groceries, appliances and durable goods. In some cases, the savings can be as much as 50 percent. Again, once a person realizes how much is discounted regularly when using coupons, it’s foolish not to take advantage of them. Older adults are fairly used to clipping paper coupons, but many brands and businesses have switched to electronic coupons and advertisements by email or text. Just be sure couponing doesn’t negatively impact your loved one’s shopping habits. Many consumers are lured into spending money on items they normally wouldn’t buy just because they “got a deal.” Encourage them to only purchase items they need and like—and in realistic quantities to minimize waste and storage issues.
Control Credit Card Debt
If mounting credit card debt is an issue, it may help your loved one to rely on cash or a debit card instead. This way they have a finite amount of money at their disposal to hopefully keep spending in check. With a debit card, the connected account can be replenished every month, but the senior must keep track of their balance to avoid overdrafts and fees. This is just one of several beneficial credit card strategies for retirees.
Look for Telecommunications Bundles
Telecom companies usually offer cable, internet, home security, and home and/or cellular phone services in bundles or packages that are cheaper than paying for each service individually. Inquire about package deals, senior discounts and introductory offers to minimize costs. Just be sure to avoid bundles that include services your loved one doesn’t want or need and unreasonably long contract terms.
Create a Financial System
Making a budget doesn’t do much good if your loved one doesn’t follow it and monitor their progress. Some seniors simply aren’t good at restricting their spending or paying bills on time. Others aren’t interested in goal setting or seeing how much money they were able to save from month to month. If your loved one is of sound mind but isn’t keen on taking a hands-on approach to their own financial situation, then it may be time to offer some help.
It’s important for every senior to complete a durable financial power of attorney (POA) document. If an elder is ever unable to make sound financial decisions for themselves, this legal document names a trustworthy person (known as the agent) to act on their behalf in a financial capacity. Many family caregivers also assist with money management for seniors who are still competent, and a financial POA document comes in handy in these situations as well.
POA documents can be written in many different ways, so it’s important for your loved one to work with an elder law attorney to draft one that works for their unique situation. Financial advisors usually recommend that a family member be given financial POA. However, if a senior can’t decide who to name, they may want to consider hiring a daily money manager. Their services meet a variety of needs, including organizing and keeping track of financial paperwork, writing checks, paying bills, budgeting and managing bank accounts.